What if the Model 3 is a success

What if the Model 3 is a success

What's your definition of success for the Model 3? Just trying to balance the human tendency to ask negative-oriented questions.

My two cents, it will be preceded by the success of the Gigafactory and success at getting improved energy density for the battery. If measured by that, there will be a broad transformation in the car industry.

Chunky Jr. | 16 March, 2016

Tesla has said it wants to do 500K cars a year, so if model 3 gets them to that point, then almost everyone would call it a success.

Ankit Mishra | 16 March, 2016

My definition of success is about 250000 reservations for Model 3 before launch. It will take Tesla at least a year to go through prelaunch reservations. I predict it will happen. There will be huge lines on 31st. Media will go crazy after the reveal.

danCE | 16 March, 2016

Ankit, your numbers are ridiculous. Just looking at the S and X rollouts, if the first cars are delivered by the end of 2017, it's going to take Tesla at least a year to deliver 50,000 cars. That's even allowing for the fact that this car is engineered to be "easy to build". Real volume won't happen until they open a factory in Europe and another in China to handle the Far East market.

My guess is that they will have 100,000 reservations by the end of 2017, but remember also that some of them will drop out when asked to actually convert the reservation into an order. I figure also that Tesla will need at least 10,000 cars around the world for showroom demonstrators and service loaners. So if you're at the end of that queue, don't expect to receive your car until late 2019.

KP in NPT | 16 March, 2016

I don't agree with Ankit's 250K before launch for success number - I think the number will be lower but still defined as success given people are reserving never having seen the car in person, much less driven it. If it's even 100K I would define that as a major success. How many teslas in total are on the road now? After how many years?

While I agree with much of what you said, @danCE - isn't the Fremont factory capable of 500K cars itself once it's fully ramped? I thought I read that somewhere...

danCE | 16 March, 2016

I think the operative word is "fully ramped". I haven't taken a factory tour but I'm sure it supports multiple production lines. But can Tesla afford to build out multiple production lines at once. My guess is that they start with one line and then use initial sales to find the build out for a second and then a third line. This approach also helps get the production kinks out before they have invested too much. Also, they may have to find the construction of new factories in Europe and the Far East, as well as expansion of the Gigafactory. That's a lot of CapEx.

Ankit Mishra | 16 March, 2016

I will show you guys how I reached that number.
Tesla's 2015 sales - 50000
Tesla's 2016 target - 85000
What changed? A new product was added. I assumed that a new product increases the sales to roughly 70%.
Tesla's 2017 target prediction - 145000
Now, Iets assume X=S=72500 in 2017 and X=S=42500
I assumed 3 as a ghost product. It's moderately loaded version will cost around $50000. Moderately loaded version of S and X cost around $100000. So, I assumed two times ghost sale for 3.
So, ghost sales/reservations in 2016 for Model 3 = 42500*2=85000. For 2017, it will be 145000. Total about 230000. I did this calculation in mind very fast and came to above quoted no. of 250000.

Red Sage ca us | 16 March, 2016

Then, I will get my car sometime in 2019.

lar_lef | 16 March, 2016

imo big success. Hopefully by 2018.

Red Sage ca us | 16 March, 2016

It is a matter of magnitude. In 2012 Tesla Motors would have been happy if combined sales of Model S and Model X during 2013 came to 20,000 units worldwide. They Delivered over 22,000 of Model S alone that year.

We know that Tesla Motors intends to build around 500,000 per year of Model ≡ at Fremont by 2020. With that goal in mind, they will likely have to start off well, with at least a 100,000 unit Production during 2018. If 80% of those reach US Customers that first full calendar year, that will be an impressive start. But Production would still have to ramp up quickly, dependent upon how many outstanding Reservations are in place when Sales begin. Elon Musk has already indicated that anything beyond a three month lead time is unacceptable. So, a two year waiting list would have to be paired down quickly -- assuming 250,000 Reservations in place by October 1, 2017.

inconel | 16 March, 2016

If Model 3 is a success then the Koch brothers and GM would have failed.

Shesmyne2 | 16 March, 2016

How can it NOT be a success?
They nailed it on the S
Then they built the crazy X
A nice combination of the two and the 'mass market' goal could be fantastic.
I'll be waiting patiently. Maybe.

Still Grinnig ;-)

mille | 16 March, 2016

@Evino: btw...I don't feel like I am trolling with a legitimate concern. I want Tesla to succeed.

Sudre_ | 16 March, 2016

The real question might be, What if Model 3 was too big of a success?

They'd need money to expand quickly. If the, while admittedly over zealous, 250K turns out to be a true reservation number within the first weekend to month then Tesla is going to have to jump to a huge production run pretty darn quick by 2018 or people will start getting unhappy. If the first month has very large reservations then they could see number in the 500-1M range by the time build time comes... altho I think once it hits 100-200K people might stop reserving thinking they'll never get it.

They'll need a fully functioning battery factory and full resources coming into it, plus substantial fully scaled vehicle assembly lines by the end of 2018. They will end up needing cash. That said I think the market will be fine with another stock offering if this is the reason.

GM will poop a brick. The amount of lobbying to make Tesla's sales model illegal will be unprecedented. All other car makers for the most part will be in deep trouble. They will have to scramble to build their own battery factories.

By 2020 Tesla just might have a $17,500 model.

Oh and shorts will not just be crushed but pulverized.

Tstolz | 16 March, 2016

Clearly it will build to 500,000 by 2020 and not start out that way. I'm betting Tesla would be happy with 100,000 reservations and 80,000 delivered by the end of 2018. I'd be more worried if they get 500,000 orders right away ... a real possibility IMHO.

KP in NPT | 16 March, 2016

@Sudre lol - yeah they'll poop a brick - but at that point it will be too late. Any efforts then to block Tesla sales will outrage the customers - and the general public IMO. It will have gotten too big. Right now I think efforts to thwart Tesla have somewhat succeeded (In certain states) because a lot of people still don't know anything about Tesla. But once that changes...and people see dealers aren't going belly up in states that allow their sales, and people WANT the car, they will have to revisit things.

I am hoping states that have successfully blocked tesla so far will also be forced by their constituents to cave. There will be an outcry. I hope this is part of their master plan, too. :)

Red Sage ca us | 17 March, 2016

I have faith that Elon Musk won't allow Franz Von Holzhausen to come up with a vehicle design that amounts to a 'Tesla Edsel' or 'Tesla Gremlin' that is universally panned by the automotive press worldwide. At the same time, I don't expect to see a boring, generic, ordinary, plain, nondescript vehicle that might as well be called a 'Tesla JustARental'. The Model ≡ will be beautiful, desirable, and attractive at the very least -- not the sort of combination that typically leads to a 'flop'.

Tesla Model ≡ must be a success in the United States. Should its sales here exceed 80,000 units per year, that is exactly what it will be. That would be enough to place it in the top 30 passenger cars sold annually. I expect it to reach that goal in 2018 rather easily -- and grow from there.

Ross1 | 20 March, 2016

Tesla is good at handling small numbers of clients, not so good now with larger numbers. How will they do with giganumbers? 500 000 cars a year require 500 000 happy customers. Really hope they get some good management, or we won't be going to Mars any time 'soon'.

Madatgascar | 20 March, 2016

Red Sage +1.

Model S killed it in the luxury sedan segment without either (A) advertising, or (B) luxury. Model 3 will offer the same EV advantages in a field where luxury is not expected, and will not need advertising because Model S has already made Tesla an aspirational brand. I fully expect the design will be stunning - it's much easier to make an attractive mid sized sedan than an SUV. The other manufacturers have so far failed to deliver EV in a desirable package (I say this is intentional), but Franz will hit it out of the park.

I expect the only problem they will have is meeting unprecedented demand, and possibly increased legal challenges to their distribution model in the US.

Tstolz | 21 March, 2016

The demand for M ☰ should help convince policy regulators in regressive states to lighten up. Generally it doesn't pay to annoy voters. It's amazing that a country that symbolizes freedom and open markets world wide can also be so protectionist!

Car makers do have one good point though ... I they feel that their dealer network no longer gives them sufficient value, they should be able to chose a new model. This seems to work in Europe ... company stores coexist with dealer stores.

Maybe the success of M ☰ will drive this!

logicalthinker | 25 March, 2016

**WHAT IF** the Model ≡ is so mindblowing that 1,000,000 reservations are made the first week and 10 million reservations in the first month???

Red Sage ca us | 25 March, 2016

logicalthinker: If that happens, then Tesla Motors should immediately apply for the remaining $15,000,000,000 or so that is remaining in the Advanced Technology Vehicles Manufacturing (ATVM) loan program from the Department of Energy. They could use it to: 1) Complete the Gigafactory; 2) Start a second Gigafactory; 3) Complete expansion plans at Fremont; and 4) Open a second assembly plant in Texas, Mississippi, or North Carolina. Of course, with their stock shooting to over $500 per share, they might not bother with the loan program at all...

Chunky Jr. | 25 March, 2016

If Model 3 is a big success, what are the Tesla haters going to complain about? One of their big complaints is that they are toys for rich people, and with Model 3, that argument goes out the window. I suppose they will continue to babble on about government subsidies and continue to ignore that a large number of companies get similar deals. Or continue to claim that EVs aren't really clean because electricity runs from coal while ignoring the energy needed to refine crude oil into gas, and that only a fraction of energy is generated from coal.

Red Sage ca us | 25 March, 2016

As far as I can tell, the single ugliest automotive design that Franz von Holzhausen had a hand in designing was the Mazda Kabura Concept... And even it was kind of hot. So, I am very certain the Tesla Model ≡ will be very appealing.

carlk | 25 March, 2016

Elon said many times he hates ugly cars. Any car that passed him I'm sure is going to be a great looking one. He does have a good taste on cars too. He bought the Mclaren F1 at age of 29. The car he owned before that was a Jaguar E-Type which Enzo Ferrari called on its release the most beautiful car ever made.

Red Sage ca us | 27 March, 2016

carlk: Yes. I believe that is why he jumped at the chance to bring Franz von Holzhausen on board after he discovered the duplicity of Henrik Fisker. Franz's designs that made it to Production are quite nice:

Bluesday Afternoon | 5 October, 2016

Enjoyed rereading this thread. Remember, these comments were made weeks before the unveiling. Sudre's comment is pretty impressive among others.

How close to 1,000,000 reservations will there be by the time employees get their Model 3's? Only Tesla knows the current reservation number (I'd guess over 450,000) but 750,000 reservations may be an understatement when they start rolling off the line a year from now. Incredible!

JeffreyR | 5 October, 2016

From Q2 Report:
"As of June 30, 2016 and December 31, 2015, we held customer deposits of $679.8 million and $283.4 million. The increase is primarily due to Model 3 deposits."

Bluesday Afternoon | 5 October, 2016

@JeffreyR - the December $'s would not reflect Model 3 reservations and the June $285.4 million is short of the claimed 385,000 to 400,000 reservations. Looking forward to the 3Q report.

tigardspaz | 5 October, 2016

It said "The increase is primarily due to Model 3 deposits." I'm no accountant, but I took that to mean the difference between the $679.8 million they had in June of 2016 and the $283.4 million they had in December of 2015. By my calculations, that's 396,000 reservations.

Linemanap | 6 October, 2016

Tesla is putting the fear into car companies and power company monopolies and coops. The one i work for has been telling people solar panels are a bad investment and trying to figure out how to keep Solarcity soon to be Tesla from stealing their customers but the numbers don't add up and technology is advancing so quickly that I can't even imagine any residential home sending a check to the power company every month in the future(15 years or so) . So who will be paying to maintain the grid when everyone is making and storing their own power. Tesla is totally disruptive to the whole energy sector. Sometimes I can't believe This is really happening in my lifetime and most people don't even see it coming.

topher | 7 October, 2016

The electrical grid is a great thing to have. I for one am willing to pay to continue to have it, even when my Photovoltaics produce all the energy I need. That said, my current electric company (and governor) look to be trying to push me off. So I may need to go completely off-grid.

Thank You kindly.

JeffreyR | 7 October, 2016

@Simply Red
Here is a link directly to page 16 so you can read what I am referring to:

I agree Tesla is the only true source of current reservations, but as @gregcropper points out you can infer an estimate of Model ≡ reservations from the reported Customer Deposits. If you want to get more accurate inferences you could track deliveries, in-shipping and inventory from all the Quarterly Reports to see what kind of correlation exists. Historical deposit numbers should show a trend for Model S and Model X. Once you have that figured out you simply subtract them out of the total.
You won't be able to get an exact number because you must guess things like cancellations, number of Signature deposits, and other possible oddities. But, you should be able to get a nice range of likely reservation totals.

Bluesday Afternoon | 7 October, 2016

My error. Perhaps I shouldn't do my own taxes?!

Ross1 | 8 October, 2016

Ankit Mishra had it spot on effectively.
Where is Ankit now, I miss him?

bgbythsea | 30 October, 2016

Barring something cataclysmic, it will succeed. The irony will be that the more successful the Model 3 is, the scarier the ride will be for Tesla. With reservations standing at about 400k now, once the initial release happens (of say 50,000 cars), there will be a surge of new reservations equaling the remaining ones, creating a "guestimated" backlog a of easily 700,000 units. The ramp-up of production will be strained for years. Live long and prosper Elon. And start lining up sites and funding for more assembly plants and GF's NOW!!

Red Sage ca us | 30 October, 2016

It's always nice to look through posts I made in older threads and find I still agree with myself.

Ross1 | 30 October, 2016

Mirror mirror on the wall..

Haggy | 30 October, 2016

We simply don't have the numbers to determine the backlog, but considering that the waiting period hasn't changed significantly but the throughput has, it stands to reason that the reservations for current production models has risen in proportion to throughput. You could take the number from last year, multiply it by the number of deliveries in the most recent quarter for that report, then divide by the number of deliveries for the quarter that ended in that December, then subtract what's left from the June total, and divide by 1000, and you'll get something that might be a closer estimate, but I didn't even bother to do the math because the accuracy of such an estimate isn't worth the time.

We can simply assume that the number that Tesla gave is accurate enough, or more properly, that the total amount from deposits is a bottom line number for deposits, and it's how much Tesla has that counts. It's a given that there will be a backlog when production starts, and that orders will go up long before Tesla catches up, if they ever do catch up.

Also, I don't think Tesla cares too much about the number as it stands now, since that will change dramatically after the next reveal, and the deposit is only a few percent of the total price.

jordanrichard | 30 October, 2016

Elon had recently said that the first year's production of the M≡ is sold out. Of course that requires all reservation holders to become actual orders. but the point he was making still stands.

JeffreyR | 30 October, 2016

You are right. We do not have hard numbers for reservations. Here are customer deposits reported:

Oct/26 8-K



10-Q for June 2016


That's about $10M or another 10,000 deposits. Now we cannot draw a straight line to exactly 10K new reservations.

Another good point you make is that the $1K Tesla gets for a reservation does not come close to the money they get for a sale. Tesla is trying to sell a MS instead of a M≡ every chance they get. That's why they re-introduced the MS-60.